Judy Pemberton knows just about
everything about condos. She’s lived in them and she sells them. So
her words — or mantra — for potential condo buyers is worth some
attention. Her instructions are simple: get involved, do your
When you buy a condo you own a portion
of the building in which you live. You also share ownership of common
areas, including interior hallways of a high-rise condo development
and exterior areas such as walking paths. The cost of maintaining the
property is shared by all owners through a monthly fee or assessment.
And it’s those fees, says Pemberton,
director of the condominium sales division at Ogden, The Real Estate
Co., that prospective buyers typically have the most questions about.
"Read the condo documents, learn about the fees," Pemberton
says. "Look at what these fees include, because all of those
goodies that a development offers like swimming pools and fitness
rooms can also impact the fees. There are costs for liability and
upkeep with those." Pemberton says the amount of land in a condo
development can affect monthly fees as well.
Once a client buys a condo she
encourages them to get involved with the development’s governing
board or association. The board can create specific rules for a
development and it typically has periodic meetings — some just once
a year — to deal with various issues, including condo fees. "I’m
not saying you have to sit on the board," she says. "Just
get involved. Attend the meetings. Many people who buy condos want
maintenance-free living, so oftentimes they don’t really get
involved in what’s going on internally on the board," she says.
Paul Apfelbach, owner of Heron Pond
Development in Mequon, has developed several condominium developments,
including Essex Place, Heron Pond and Hidden Creek. He says there is a
widespread misunderstanding and lack of knowledge about condos, how
they are operated and what condo fees are. "People are all caught
up in the emotion of buying a place to live and then they are handed
condo documents that are 2 inches thick," he says. "And they
say, ‘Everybody lives in condos. I don’t need to read this.’ And
then there is a real potential for disappointment or adjustment."
He says buyers not only don’t read
the documents, which explains the condo owner’s and condo
association’s different responsibilities, they oftentimes don’t
understand what they are reading. "The documents can be so vague
that two perfectly intelligent people can read it and come up with two
different conclusions," he says. "I’ve seen two educated
people get into a fight over a $300 mulching bill."
Apfelbach stresses the importance of
reading and understanding the condo documents before buying a condo.
He says it is also important to understand what condo living means.
"You’ve got to have some tolerance and understand that there
isn’t a completely fair scenario," he says. "If they’re
not tolerant to community living, then they shouldn’t move into a
Mark O’Neill, a real estate attorney
with Godfrey & Kahn, says buyers need to remember that condo fees
are the "function of the costs to run the organization." And
size and scope of that organization and its board can determine the
O’Neill and Pemberton say buyers
should make sure the condo association has some sort of reserve fund.
This fund will help cover unexpected costs and pay for larger projects
such as putting in a new roof. "You don’t want to move in and
then find out a large special assessment is coming your way," O’Neill
O’Neill says although it’s
important to be cautious, buyers should also realize that running and
maintaining a development costs money. "People simply need to be
realistic on the cost of running a condo development," he says.
"All real estate projects are different. But if it seems too good
to be true, it probably is.
"If the condo fee is so low, you
need to ask, ‘How could the association possibly cover the costs of
Apfelbach says whether a development
has a reserve fund that is 100 percent funded by the owners depends on
its demographic. "If you have a project that is more entry level,
you’ll probably want your buyers to pay as they go (through a
monthly fee)," he says. In a higher-end development, the owners
may prefer to control their money through investments and be assessed
a large fee to pay for a roof or other improvements on a periodic
basis. "But you need to make sure your owners have the
wherewithal to pay for that roof when the time comes," he says.
"Because the association has a right to do it and take legal
action if they don’t pay."
O’Neill says there is varying degree
of developers — some who are conservative with their condo fee
estimates and others who low-ball the fees in hopes of attracting
buyers. Both tactics can be a detriment to the developer. If the costs
are too high it can scare buyers away. And if the fees are low and
then rise after someone buys the condo, it can hurt the developer’s
reputation and make it difficult for them to sell the rest of the
"In the end, you can have
purchasers who are very upset and it can impact the project," O’Neill
Apfelbach says fees sometimes rise
after the condo association takes over because the developer used his
own crew to maintain the landscaping. Once the developer steps away
from the project the association must now pay for those services. He
says the most common source of rising fees is at the association
level. "Buyers have to understand the fees are related to a
budget and the budget is related to a bundle of services," he
says. "And every service imaginable is possible. You get people
who value things differently within a development. Some may not care
about throwing salt on a sidewalk for themselves, while others
practically want to be waited on."
He says an association board must
understand that maintenance is important, but each new service can
cause fees to rise. "An association’s budget can be wiped out
because of excessive salting," he says. "You’d be
surprised how expensive that is."
Nicholas V. Gouletas, CEO and founder
of NVG Residential Inc., says he spends considerable time figuring out
how much it will cost to run a condo development. Gouletas is
currently converting the Landmark on the Lake high rise on Prospect
Avenue in Milwaukee into 275 condos.
Gouletas says he looks at the last
three years of an apartment building’s expenses to help determine
the cost of maintaining it as a condo development.
He also forecasts future capital
improvements and includes this in the condo fees. A portion of each
condo owner’s monthly fee goes into a reserve fund.
He says he makes sure his budget is as
accurate as possible because, "I’m going to be there next year
and I want to know that I can always look at those buyers in the
The assessments at Landmark on the Lake
range from $266 to $327 a month for a one-bedroom condo to as high as
$460 to $550 a month for a condo with three or more bedrooms. The
development’s many amenities including a 24-hour doorman, 24-hour
fitness center, indoor pool, concierge services and sports deck that
contribute to the total condo fee.
"The most common question I get
is, ‘What are these fees and where do they go?’" he says.
"Really a condo is about the same cost as a house. But the
difference is when your home needs a new roof you can’t go down the
street and ask your neighbors to help pay for it. With a condo
everyone helps pay for it."